* Yen comes under renewed pressure vs dollar and euro
* Euro investors position before Thursday's ECB meeting
NEW YORK Jan 9 The dollar rallied against the
yen on Wednesday, ending two days of declines and moving back
towards a recent 2-1/2 year high, as positioning on expectations
of easier Bank of Japan monetary policy led some investors to
sell the Japanese currency.
Yen sentiment has been volatile as the BOJ Jan. 21-22 policy
meeting approaches, but traders said the dollar's pullback in
the previous two sessions had lured investors waiting for a
chance to buy on dips. Speculation that the BOJ could deliver
further aggressive easing steps has capped any gains even when
it did rally.
"Looking ahead to the BOJ later this month, investors are a
little hesitant to bid the yen up too much higher," said Omer
Esiner, chief market analyst, at Commonwealth Foreign Exchange
in Washington. "The outlook for additional easing is keeping a
lid on the yen to the upside."
The dollar rose 1 percent on the day to 87.90 yen,
lifting off a near one-week low of 86.81 hit earlier in the
session, using Reuters data. That low marked a loss of about 1.8
percent from last Friday's peak of 88.40 yen. The session peak
was 87.97 yen, a two-day high.
Some US$2.8 billion in yen changed hands, according to
Sources familiar with the BOJ's thinking said the central
bank was likely to adopt a 2 percent inflation target at the
meeting, double its current goal, and issue a statement with the
government promising bold monetary easing steps.
The BOJ will also consider easing monetary policy again this
month, probably through an increase in its 101 trillion yen
($1.2 trillion) asset buying and lending programme, the sources
Expectations that Japan's newly elected government led by
Prime Minister Shinzo Abe would push the BOJ to adopt more
forceful monetary stimulus measures have driven the yen sharply
lower in recent months. But the dollar and the euro eased
against the yen this week as investors locked in profits after
At Friday's peak, the dollar had gained nearly 12 percent
against the yen since early November, and traders said the rally
was due for a pause.
"After a 10-12 percent rise, there is bound to be some
consolidation and a shakeout could possibly see dollar drop to
84 yen," said Howard Jones, partner at money manager RMG Wealth
Management in London.
"But any consolidation will be short-lived. From a macro
view, with a huge change of policy taking place in Japan and the
government determined to drive the yen lower, one must not
underestimate them. We are looking at the dollar hitting 100 yen
during the course of this year."
On Wednesday, Abe repeated his call to the BOJ to take
sufficient steps to achieve a 2 percent inflation target while
Finance Minister Taro Aso called for aggressive measures to beat
The yen's weakness helped the euro, which rose 0.8 percent
to 114.75 yen, but was still some way from an 18-month
high set on Jan. 2.
But the euro was 0.2 percent lower at $1.3049 ahead
of a European Central Bank meeting on Thursday. While
strategists suggest the ECB will keep its interest rates on hold
on Thursday, some investors and economists believe rates will be
cut later this year.
"The euro weakened to 1.3035 ahead of the European Central
Bank interest rate decision and the single currency may continue
to give back the rally carried over from the previous should
President Mario Draghi talk up speculation for another rate
cut," said David Song, Currency Analyst at DailyFX in New York.
Some US$3.6 billion in euros had changed hands through the
global session on Wednesday, according to Reuters Dealing